Hain Celestial's Q2 Miss: Supply Chain Snags, Outlook Cut, and More

Hain Celestial Group Inc. (HAIN) shares plummeted on Monday following the company's second-quarter earnings report, which missed analyst expectations and highlighted ongoing challenges in the snacks category. The company reported a 9.4% year-over-year decline in second-quarter sales to $411.49 million, falling short of the consensus estimate of $431.55 million. Organic net sales from North America decreased 9% year-over-year, driven primarily by lower sales in snacks due to in-store marketing activation and promotion effectiveness, as well as by lower sales in personal care. International organic sales declined 4%, due primarily to lower sales in meal prep and short-term service challenges.



The company's adjusted gross margin for the quarter contracted 60 basis points year-over-year to 22.9%. The operating loss for the quarter was $91.8 million versus a loss of $0.8 million last year. Adjusted EBITDA was $38 million compared to $47 million in the prior year period, with an adjusted EBITDA margin of 9.2%, compared to 10.4% in the prior year period. Adjusted EPS of $0.08 missed the consensus estimate of $0.12. The company held $56.2 million in cash and equivalents as of December 31, 2024. Operating cash flow for the quarter was $31 million, with a free cash flow of $25 million. Net debt at the end of the fiscal second quarter was $672 million compared to $690 million at the beginning of the fiscal year.



In response to the earnings miss, Hain Celestial's CFO, Lee Boyce, stated, "Commercial execution and supply chain challenges drove second quarter results that were below our expectations. We have already taken steps to address these challenges and remain focused on disciplined execution. Recent distribution wins and the recovery of our infant formula supply bolster our belief that we are well positioned to pivot to growth in the back half of the year, however given performance to date and the challenging macroeconomic backdrop we are adjusting our full year outlook."

The company revised its fiscal 2025 outlook, with organic net sales now expected to decline by 2% to 4%, down from the previous view of flat or better organic net sales growth. Adjusted EBITDA is expected to be flat year-on-year, down from the prior view of mid-single-digit growth. Gross margin is expected to improve by at least 90 basis points, down from the previous view of at least 125 basis points.



Hain Celestial's shares are trading lower by 21.9% at $3.665 at the last check Monday. The company's struggles in the snacks category, combined with the challenging macroeconomic backdrop, have led to a downward revision in its outlook for the full year. Investors will be closely watching the company's efforts to address supply chain challenges and improve marketing effectiveness in the snacks category, as well as its strategic review of the personal care business, to determine the company's long-term growth prospects.